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FIRST NATIONAL BANK OF SCOTIA
Robert E. Feldman, Executive Secretary
Attention: Comments
Federal Deposit Insurance Corporation
550 17th Street, NW
Washington, DC 20429
Re: Community Reinvestment Act Regulations
Dear Sir or Madam:
This letter is submitted in support of the federal bank regulators'
proposal to increase the asset size of banks eligible for the small bank
streamlined Community Reinvestment Act (CRA) examination from $250
million to $500 million and elimination of the holding company size
limit (currently $1 billion). As a fourth generation community banker, I
strongly endorse this proposal, for it will greatly reduce regulatory
burden upon community banks like ourselves. I am the Senior Vice
President and Senior Lending Officer of First National Bank of Scotia, a
locally owned, $255 million national bank located in Scotia New York.
First National Bank of Scotia was founded in 1923 by a group of local
businessmen to meet the needs of their community, which at the time was
served by only “large” banks. They felt the other area banks had grown
too large and had lost their commitment to the local business community.
Here we are over 80 years later, and we see the same issues in our area
once again. Our bank is owned and managed by people who live and work in
this community. We are like most of our peers, the heart of our small
villages, towns, and cities.
The initial introduction of the small bank CRA examination process
was a welcome recognition of the differences between small community
based banks and large regional or national financial institutions. As a
community banker, I am encouraged that the agencies have recognized that
it is time to expand this critical burden reduction benefit to larger
community banks. At this critical time for the economy, this will allow
more community banks to focus on what we do best; fueling America's
local economies. When a bank our size must comply with the requirements
of the large bank CRA evaluation process, essentially the same process
that huge multi-billion dollar, nationwide banks must comply with, the
costs and burdens increase dramatically. A bank our size, that does not
stray from it’s local base, must now meet the same extensive paperwork
burden that is required of a much larger bank that has offices across
the nation. The resources we must now devote to the documentation
requirements of the current large bank CRA examination procedures are
resources not available for meeting the credit demands of the community.
We are in the process of preparing for our transition to the large bank
examination process, and have estimated that our paperwork burden and
the associated expense will increase dramatically.
Adjusting the asset size limit also more accurately reflects
significant changes and consolidation within the banking industry in the
last 10 years. To be fair, banks should be evaluated against their
peers, not banks hundreds of time their size. The proposed change
recognizes that it's not right to assess the CRA performance of a $500
million bank with the same exam procedures used for a $500 billion bank.
Large banks now stretch from coast-to-coast with assets in the hundreds
of billions of dollars. It is not equitable, nor logical, to rate a
community bank using the same CRA examination.
Unfortunately, and ironically, community activists seem oblivious to
the costs and burdens associated with the expanded exams, yet they
object to bank mergers that remove the local bank from the community.
This is contradictory. If community groups want to keep the local banks
in the community where they have better access to decision-makers, they
must recognize that regulatory burdens are strangling smaller
institutions and forcing them to consider selling to larger institutions
that can better manage the burdens.
Increasing the size of banks eligible for the small-bank streamlined
CRA examination does not relieve banks from CRA responsibilities. Since
the survival of many community banks is closely intertwined with the
success and viability of their communities, the increase will merely
eliminate some of the most burdensome requirements. It will not change
the focus and missions of community banks.
I urge you to break the continuing pattern of increased regulatory
burdens placed upon the nations small community banks. We may not have
the lobbying power of the nations large banks, but we are an important
part of America’s economy, as we have been from the beginning days of
our nation. It is my hope that community banking will be around for many
more generations, and that a fifth and sixth generation of my family
will have the same opportunities to serve their community as I have.
In summary, I believe that increasing the asset-size of banks
eligible for the small bank streamlined CRA examination process is an
important first step to reducing regulatory burden. While community
banks still must comply with the general requirements of CRA, this
change will eliminate some of the most problematic and burdensome
elements of the current CRA regulation from community banks that are
drowning in regulatory red-tape.
Sincerely,
John H Buhrmaster
Sr. Vice President
First National Bank of Scotia
Scotia, NY
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